Dems: Ryan tax plan regressive

When Paul Ryan unveiled the House Republican budget this week, he insisted that he didn’t want to relitigate the drama of the fiscal cliff.

Democrats aren’t so sure.

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The fiscal cliff deal added a new tax bracket for top earners. That resulted in the most progressive tax regime in more than a decade with seven brackets imposing rates from 10 percent to 39.6 percent.

But the Ryan budget revives the long-held GOP goal to shrink the Tax Code to two tax brackets — a move that Democrats say would make the Tax Code dramatically less progressive, at the expense of middle- and lower-income taxpayers.

For Democrats, building more progressivity into the Tax Code was one of the key victories from the fiscal cliff deal — right up there with securing more than $600 billion in new revenue and keeping several stimulus-era tax provisions in place.

President Barack Obama and Democrats have been running into a buzz saw of Republican opposition to another round of new tax revenue. And liberals are not interested in making the system any flatter.

“The Republican budget would mean a huge tax cut for the very wealthy, leading to tax increases for middle-income families,” Michigan Rep. Sander Levin, the top Democrat on the tax-writing Ways and Means Committee, told POLITICO. “It moves at the opposite direction of the fiscal cliff deal at a time when income inequality continues its rapid rise in our nation. It would tie tax reform into knots.”

Maryland Rep. Chris Van Hollen, ranking Democrat on the Budget Committee, said any changes to the Tax Code must leave the system “at least as progressive” as the one in place today.

Senate Finance Committee Chairman Max Baucus (D-Mont.) also wants to maintain current levels of progressivity. As a result, flattening the system — never an easy political task for conservatives — is now an even tougher battle to wage. Some House Republicans left a private meeting with Obama on Wednesday convinced he doesn’t want to do much at all to change individual tax rates.

Tussles over how low tax rates should go and whether tax reform should generate more revenue for the government grab plenty of headlines. But the progressivity debate speaks to the inherent philosophical divide that plagues Congress, where Democrats believe the wealthy should pay more in taxes, and Republicans counter that such policies curb innovation and job creation.

“A flatter Tax Code is just going to give you greater opportunity for economic growth,” Sen. Mike Johanns (R-Neb.) told POLITICO. “People take the capital that they create, and they reinvest it in the economy, because there’s an economic incentive to do that. On the other hand, if we say to those people that as you get more successful, we’re going to take more and more and tax the rich, you’ll slow down the economy.”

It’s not that Republicans are outright opposed to a tax system that includes progressive characteristics. It’s just that they are more neutral on the question and don’t necessarily view progressivity as more important than lowering rates and broadening the base of taxpayers.